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ABB (NYSE:ABB)

Q2 2012 Earnings Call

July 26, 2012 9:00 am ET

Executives

Joseph M. Hogan - Chief Executive Officer

Michel Demaré - Chief Financial Officer

Analysts

Mark Troman - BofA Merrill Lynch, Research Division

Andreas P. Willi - JP Morgan Chase & Co, Research Division

Ben Uglow - Morgan Stanley, Research Division

William Mackie - Berenberg Bank, Research Division

James Moore - Redburn Partners LLP, Research Division

Fredric Stahl - UBS Investment Bank, Research Division

Olivier Esnou - Exane BNP Paribas, Research Division

Daniela Costa - Goldman Sachs Group Inc., Research Division

Operator

Ladies and gentlemen, good morning and good afternoon. Welcome to the ABB Second Quarter 2012 Results Analyst and Investor Conference Call. I'm Stephanie, the Chorus Call operator. [Operator Instructions] The conference is being recorded. After the presentation there will be a Q&A session. [Operator Instructions] At this time, it's my pleasure to hand over to Joe Hogan, CEO of ABB; and Michel Demaré, CFO of ABB. Please go ahead, gentlemen.

Joseph M. Hogan

Hi, good afternoon, thanks for joining us. Michel and I will be here to walk through some of the slides and to take any questions. As always, the charts and the presentation that we're going to speak from is on abb.com. I turn your attention also to Chart 2, which is our Safe Harbor statement. And let's quickly move to Chart 3.

So just from a high-level standpoint, we announced that both orders and revenues were higher despite, obviously, the uncertain market conditions that exist around the world today. Currency translation is, I would say, kind of an overrated. There's a lot of noise in our numbers, and hopefully, this presentation helps to clear up some of that noise. The 2 big areas of noise would be the Thomas & Betts acquisition along with the currency translation piece. And when you look at the currency translation, it reduced reported revenues by about $600 million and EBITDA by about $100 million, so substantial in that sense.

China orders stabilized, particularly in Low Voltage Products, where we had some issues in the first quarter. North America, still strong for us. We saw a rebound in the Middle East, and Europe, steady. I'd say there's a two-tier Europe, between North and South, we'll talk about it. But at least, there was a positive order for the quarter. Order price pressure in power is easing, and I say slightly, but we do see that easing. Steady Power Project (sic) [Products] margins over the last 3 quarters, and Michel and I will explain that. Operational EBITDA decreased versus the second quarter of last year. Some negative mix, and obviously, the U.S. strong dollar translation, but we saw some good progress quarter-to-quarter.

Thomas & Betts acquisition is completed. We got about 6 weeks in, and we'll walk you through how that looks. And in divisions, delivered really solid cash from operations. But we'll talk to you about some of the cash shortfall that we've had and as to why.

Moving to Chart 4. You can see that the orders were up 2% versus second quarter of last year. And then when you look from an organic standpoint, up 9%, and then plus 6% from an overall standpoint. Revenues organic about 3% at $9.7 billion. Our order backlog, there's some questions this morning on order backlog, if you adjust from a U.S. dollar standpoint, minus 3%, but in local currency, we actually saw an increase in our backlog close to $29 billion, overall.

From an operational EBITDA standpoint, our numbers were $1.471 billion, as you can see. That's about minus 5% overall, but minus 9% from an organic standpoint, when you look at the $60 million we received from Thomas & Betts in the quarter. That gives us an operational EBITDA percent of about 15.1% versus 16% of last year. Our net income, down 27%, and cash from operations, down 33%. That will imply, I guess, some explanation, and Michel and I will walk you through that shortly.

Turning to Chart 5. Steady on higher demand in most regions. And so this is a good chart, in a sense, when you look around the globe where we stand. Starting from the left-hand side, you can see the Americas are up 20%, overall; excluding Thomas & Betts, up 10%. And really good progress in both power and automation: power, up 26%; and automation, up 16%. So we were pleased with what we see in the Americas for this quarter. Moving to the right, we look at the Middle East and Africa, up 34%, and good progress in both power and automation in that area. And it's good that we could drive some good orders realization in that part of the world for this quarter.

Moving more to the right is ASIA, minus 1%. In the next page, we'll talk more about how we can dissect Asia for you, and how that works. But overall, power, up 12%; and automation, down 8%.

And then in Europe, up 2%: with automation, up 4%; and power, up 2%, in that sense. And we were really pleased to see Europe as strong as it was from an order standpoint, given the economic uncertainty that obviously exists in Europe right now.

Moving to Chart 6. This just breaks down from a country standpoint more than how we look at things at regions, so you can get a better look at the business. You see Canada was up 30%, up 10% excluding T&B. United States is up 13%, and exclude T&B, overall. And Brazil, up 12%. When you look up above, on Norway, plus 47%. A lot of that has to do with marine and then oil and gas is associated with marine. The U.K. up 35%. You can see Russia up 15%. Germany, down 10%. We have 1 tough comparison, Discrete Automation and Motion in Germany. But overall, you see the German side down. We talked about a two-tier Europe though, with Spain, minus 30%; and Italy, minus 13%. We continue to see pressure in that area. We had strong orders in Oman, up 10x, particularly in our power automation business, overall, in the power and automation businesses. India was up 11%. In fact, we saw good operations turn around in India, too, which is establishing a positive trend force. China was down 2% overall, but the Low Voltage Products, which is our biggest concern in the first quarter, actually came back pretty strongly. And then you can see Australia is up 49%. And again, that's the mining industry there, primarily, and that teams are doing a good job in driving our portfolio in that industry in Australia.

Moving to Chart 7. And this just takes a quick look at our Power Products and Power Systems performance, overall. You could see that orders were up in Power Products, about 5%. Revenues were flat. Operational EBITDA versus the second quarter of last year, down 15%, at 14.7%. If you move down to the bottom part of what we're trying to show on this chart is that we, over the last 3 quarters, have had pretty consistent margins from an operational EBITDA standpoint in Power Products. And we're hoping that what we're showing here is we think we've found the floor here, and we're going to strive hard to be able to maintain that and then bend this curve in the future. Overall, Bernhard and his team have done a good job in Power Products. One of the big things here is the team saving about $100 million of cost in the second quarter in order to counteract the price that we still have in our backlog that's been coming through in that business.

On Power Systems, orders were very strong. Michel and I were pleased with that. Revenues, up 1%. But operational EBITDA, down 37% at 6.2%. And if you go down below and look at that, we're pleased about the tender backlog. We like the realization of the orders for this quarter. But the margin slippage had to do with some small projects in different businesses around the world, they had some slippage. And so it's not the kind of operational execution that we want to see in this business. And we're going to make sure that we continue to focus on this business so we can deliver more consistent results in the future.

Moving down below, when you think -- in Chart 8, when you think about the successes and challenges in power in Q2 2012, and I'm sure there'll be several question about this. We continue to see good orders in tendering activity across both businesses. One of the things we often don't talk about, the restructuring in our Power division, but I can ensure that it goes on all the time. And one of the reasons we're quiet about it is because of the unique concerns and different things, we want to make sure that we get through as quickly as possible. But one of the things we want to make transparent in this announcement was power transformer capacity has been cut over the last 12 months. These are large power transformer capacity, primarily, by 10%. Taking out between 600 and 700 jobs. At the same time, we have to realize that we've repositioned our footprint to lower-cost areas so it can be more competitive, too. So we call it the cost growth paradigm, and then we take out capability in some areas and then we increase capability in different areas, too.

From an M&A standpoint, we did have 1 small deal, about $35 million, with called, Tropos, which is a wireless systems in network communications. Actually, this is a small deal, and we're really excited about it. We think we acquired terrific technology. It's right in line with a very good business that we have in Power Systems on our communications. And it really -- it works well with our Process Automation division, too, in a sense of the systems work that they drive from a communications standpoint also. And so we're excited about that.

Down below, the challenges. I mean, obviously, the challenges are -- have been the challenges that we've had in this business is continuing to take cost down in Power Products and continue to reposition ourselves to make sure that we can hold the margins that we have out there. So there's going to be no let up in that sense at all. We have a strong in-country for-country focus, which means trying to make sure that we have the cost and specifications in line with the countries as much as possible, so we can increasingly become competitive around the globe. And service continues to be an area of leverage for us. We've been thinking a lot of time in resources and services, and our life cycle services are growing extremely well in that sense. And I'll talk more about that in a second.

So moving to Chart 9, and this is the Automation businesses overall, starting with Discrete Automation and Motion. I know there's a lot of concern in the first quarter about the overall margin of our Discrete Automation and Motion business, but you can see our orders were down 2%. Revenues, up 11%. Operational EBITDA, up 6%, in holding an operational EBITDA of 18.8%, which is, I feel, a very respectable margin for the quarter. We saw lower demand in renewables and rail, and especially impacting our Low Voltage drives business. Good execution on revenues led by our Robotics team and also Medium Voltage drives. Operational EBITDA margin is steady in face of this -- a lot of mix that we have going on. It's not mentioned in the highlights, but Robotics had a very strong quarter, overall. And we had 1 large order forward in the United States, too, that really helped us from an orders standpoint.

Our Low Voltage Products is a big turnaround for this division in this quarter. And Thomas & Betts, obviously, skews the figures, because you can see how much it was up with Thomas & Betts in 6 weeks. But if you look at the numbers down below that shows the adjusted numbers for just looking at continuing operations outside of Thomas & Betts, you can see that orders were up 1%, revenues were minus 2%. And overall, an operational EBITDA about 17.7%. I'd say 2 things to really call attention to here, outside the T&B acquisition, would be, one, is China turnaround, and we'll talk more about that, I'm sure, in the Q&A. But we have seen a really dramatic improvement in the business. And I'd say it's market related from a construction standpoint, it also has to do with our teams making sure that we hit all the channels that we can there and to push as hard as we can. The other side is on Low Voltage Products has been some -- taking out some costs as quickly as we can in different parts of the world. We hope to stabilize that margin versus what we saw in the first quarter. And Tarak and his team has done a good job there.

Moving to Process Automation. This division has executed extremely well in the last 18 months. You can see their orders were up 3%; revenues, up 5%; operational EBITDA, up 8%. And really a good top of the range EBITDA margin on 13.1% overall. Oil and gas and marine tend to be the real strong areas that we're seeing in the marketplace. We do see weakness in pulp and paper in some parts of the metal industry, overall. Even the higher EBITDA margin, as mentioned below, it has to do with cost savings and higher margins in life cycle services. And our measurement products business has been doing extremely well year-to-year. In fact, it's driving growth and driving margin, too. So a really good showing in Process Automation.

Moving to Chart 10. The challenges in Automation for Q2 2012, overall, is obviously the rapid margin recovery we saw on Low Voltage Products. It's been a real plus for us in the quarter. Product pricing improvements. We've gotten some net pricing improvements in our Low Voltage Products about -- everything about 1.5, year-to-year, which is good. We pushed price for where we can. In Discrete Automation and Motion, the team has pushed it there, too, where they can, in certain parts of their business. Obviously, the closed T&B acquisition is off to a good start. We'll talk about that in a moment.

And then we also inaugurated a DC data center in Switzerland. And if you were at the Capital Markets Day last year, we talked about how do we move in to the data center marketplace with different and new technology. This is a 1 megawatt data center here in Switzerland. We had basically shown what our analysis had pretty much anticipated, which is about a 10% to 15% savings in energy and about 15% savings in real estate cost. And we're going to push that in different parts of the world and to show that -- to validate that, and to push more interest in the marketplace.

Down below, the challenges and action plans. I mean, we face an uncertain market as all of our competitors do, too, so we have to continue to be fast and flexible on capacity adjustments with our team, also with our facilities. We have a strong focus on cost, as you know, and we're ahead on our cost program, and we think we'll be above $1 billion we originally mentioned as we started the year.

So moving over to Chart 11, which is on Thomas & Betts. We have the 6 weeks, as I mentioned before, that's in our income statements, since we consolidated the acquisition. We've seen in that, and from a steady standpoint, a 10% revenue growth on a full quarter basis for Thomas & Betts. Operational EBITDA margin has improved from 16.7% last year to 18.5%. And so it's really a good operations execution. So from our income statement standpoint, you'll see $310 million of revenues that's earned on Low Voltage Products, and $60 million of operating profits. So the integration is on track. We have some early wins in South America, particularly in using the infrastructure and capability at ABB to help some of Thomas & Betts' work overseas. In this case, it was a great example. And our synergy estimates that we had going in have been confirmed. We have really strong actions started around that, and we strongly believe this will be EPS accretive in year 1, okay, excluding the one-time charges.

And now down below, also just so that you can work the spreadsheets properly, is the acquisition-related costs of $70 million, $80 million for a full year. You can see what PPA will be, in $120 million for full year of 2013.

I'm going to turn it over to Michel into Chart 12. He's going to walk you through our EBITDA bridge, which is always a big hit in these kind of conferences, and Michel will take you from quarter-to-quarter, a quarter-to-quarter walk.

Michel Demaré

Okay. Thank you, Joe. I'm afraid I will have to take you to a little bit more excruciating details this quarter, because we have had so many impacts from external factors that we want to help you also understand the true operational performance of the group this quarter.

So if we start with the Chart 12, the operational EBITDA bridge. You can see that overall, the net operational EBITDA is down $76 million compared to the second quarter last year. I think we can break down this EBITDA bridge in 3 or 4 components. First of all, the first column, you see that the pricing impact was $235 million this quarter. But the good news is that we were again able to generate $277 million of cost savings. And so if you look, in fact, the pricing pressure plus project margins were totally offset by the cost savings. So, so far, the strategy has worked again. Then you can take a second group of analysis, where you see that we have continued, although at a little bit slow pace, our investment in selling and R&D, a net increase of $135 million. But that has also, since we are doing that now since 3 or 4 quarters, helped generate a volume gain that produced an additionally EBITDA in the range of $120 million.

So we see factors offsetting each other, what we are left with is basically an impact of the business mix about $60 million. And the other column that you see at minus $64 million, which includes this $100 million of translation losses due to the high dollar, which saw about $100 million, partly offset by gains in the G&A and a little bit of positive commodity impact as well. And then finally, we have T&B that added almost $60 million for the quarter, we get to this net result of $76 million lower than a quarter ago.

Moving to Chart 13. In terms of the cost savings update, we see about $280 million this quarter. Half of it comes from sourcing, 45% from operational excellence and about 5% from global footprint. What is interesting to see, also, is where it comes from. The Power divisions have generated about 2/3 of this savings, 65%; Automation, 25%. But I also want to emphasize that the part coming from Indirect Sourcing is actually improving quarter after quarter. It was 8% last quarter, it is 10% this time. So if you at it, year-to-date, after 2 quarters, we have taken out about $540 million of savings. And against that, we estimate we have lost a little bit less than $500 million in pricing. So the strategy still works there, and we're also happy to see that we are running at a run rate which is actually higher than the $1 billion target that we have fix ourselves in terms of savings. And so, we are pretty confident nowadays that we will be able to exceed this $1 billion target by the end of the year.

Moving onto Chart 14. That is not an easy one, but we are really here trying to help you a little bit get to a true assessment of what has been the operational earning per share. And why do we do this, is because this quarter we have had really 2 very important influences: one is the currencies; and the other one is the accounting related to our M&A activities. Just in terms of currency, let's start first by reminding that if we compare the average exchange rate of last quarter -- of the second quarter last year to the quarter at this time, the U.S. currency is basically revalued by more than 20% against the Brazilian real and against the Indian rupee; by 12% against the euro; 11% against the Swedish krona; 8% against the Swiss franc; and it has devalued against the Chinese renminbi by 3%. So you see it's a huge volatility, which obviously in a company like ours, has a huge impact. Joe mentioned it before, we estimate that our top line was affected by about $600 million in reporting translation, because we report in U.S. dollar. We estimate at EBITDA level, the impact was $100 million, which if you calculate after-tax and earnings per share, will present about $0.03 a share. But it has also, obviously, a side effect. For instance, on the reserves of all the derivatives which do not apply for hedge accounting, which you know that every quarter we take these derivatives away in order to give you a true picture of operational EBITDA. The same quarter last year, we had a $58 million positive impact from these derivative. This time it was a negative $82 million. So there again, because the dollar was higher, we had a negative delta of $140 million. So keep this amount in mind for a while, I will come back to it.

The second impact, as I say, is all the accounting related to M&A. Joe mentioned that we have about $70 million of one-offs linked to the T&B acquisition. We have another $20 million of all the one-offs related to other acquisitions. So the total there was $90 million. And in terms of the amortization of PPA, which is a question that you also often ask, the total for the quarter was $82 million, out of which T&B was $33 million. And this $82 million correspond or compare to $51 million in the second quarter last year.

So now I have given you all these numbers on a pretax basis. Now we go on an after-tax basis on the table. So if we start from the top there, you see the reported net income and the reported earnings per share. So earnings per share was $0.29 compared to $0.39 last year, so it's a 27% change in U.S. dollars. We have then made the corrections the same way that we correct EBITDA to operational EBITDA. So correcting for restructuring-related costs, which are not really significant here, correcting for this impact of derivatives due to hedge accounting or non-hedge accounting treatments, on an after-tax basis, that is $100 million, which means $0.05 a share. And finally, the impact of the one-offs, the $90 million, which after-tax, represents $65 million, which is another $0.03 a share.

So that is obviously a big difference. When you adjust these 3 points to try to come to an operational net income that correspond to the operational EBITDA that we always report, you see that in terms of earnings per share, we are comparing now the $0.38 of last year to $0.35 this year, which is a change of 9% in dollar terms, but of 3% in local currency. So basically, if we see the local currency translation adjustment was $100 million, which is $0.03 a share, you see that comparing the 2 operational net income, in fact, we come to the same bottom line of $0.38. And even on top of that, some of you also like to deduct the PPA amortization related to all the acquisitions we have done so far. Once we do that, we basically compare $0.40 last year to $0.37 this year. And if we add to this $0.37 the $0.03 of translation, in fact, we have unchanged operating earnings per share from 1 year to the other.

I hope I have not at all lost you. We can for sure take more questions on that. But the differences this time were so important that we saw it was crucial that we give a good explanation to it.

The strength of the U.S. dollar, going to Chart 15, not only impacted the balance sheet, it has also impacted total cash flow. As you can see from the chart, the cash flow measured here as a cash flow from operation from the divisions, has in fact been good. It has increased by $40 million from $862 million to $902 million. But on the other side, the corporate cash was a bit outflow. And what do we have in corporate cash? We obviously have there the normal corporate outflows, like corporate cost and central research cost, which is usually between $130 million and $150 million of outflows a year. But then we have also a lot of cash generated or spent from hedging corporate exposures, which can be, for instance, the operational dividends coming from subsidiaries in another currency or the balance sheet exposures that we have, too. And as a general rule, at the corporate center, we always loan dollars, so when we hedge, we sell dollar forward. And so clearly, when the dollar goes down, these hedges generate cash; when the dollar goes up, the hedges consume cash. And you can see last year, that we have, in fact, a positive corporate cash flow of about $30 million, which means that we had probably $150 million of corporate cost offset by a $180 million of cash generation from hedges. This time, we have a $300 million outflow, which means that on top of the $150 million of corporate cost, we have another $150 million of negative cash from the hedges.

It makes it very complicated, but I think it's worthwhile to explain the difference. So the net cash flow from operation is about the $300 million lower than the same quarter last year, but the cash from the divisions, again, is up $40 million.

And with that, I will pass it back to Joe -- I'm sorry, I still have another slide to cover, Chart 16.

Let's also quickly review how we are doing compared to the targets that we've fixed ourselves at our own Capital Markets Day back in 2011. So this is an 18-month assessment. And as you can see, we have 3 green lights. The organic revenue growth after 18 months is at 11%, annualized, compared to the range of 7% to 10%. Our operating EBITDA, at 14.7%, is still well within the corridor that we have fixed ourselves. And our earnings per share growth after 18 months is going at an annualized rate of 11%, which is also within the band. When it comes to free cash flow conversion, we are a little bit above 60% after 18 months, so that is on the weak side. I should point out, in any case, that it's not the right thing to look at in the middle of the year, because that is usually where the working capital is at the peak. You know that the fourth quarter is also very strong. But this is also a year where, obviously, we will be impacted by the ForEx, by the high dollar, as well as by an unusually high capital spending program, especially with the 2 cable factories that we are investing in, in Sweden and in the U.S. So that is still a target that should improve over time.

And then finally, the cash return on invested capital, it is yellow, it could even be orange, because we are at this stage in the low teens, so pretty far away from the 20%. But there as well, it's a matter of timing. We have made 2 large acquisitions, Baldor and Thomas & Betts. One we have since 16 months; the other, since 6 weeks. And obviously, we can't expect this capital toward the yield, the long-term IRRs that we have targeted for these acquisitions. And it is clear also that because of where we are in the cycle, even the organic business is not, for the moment, generating the cash returns that we used to have a couple of years ago. But again, that is a target by 2015. And I will take some time at the next Capital Markets Day to explain to you in more details how we have built this target and what are the recipes that we intend to use in order to reach it by 2015.

And with that, I pass it on to Joe for the conclusion.

Joseph M. Hogan

Thanks, Michel. Coming to Chart 17 which is the summary. So from a short-term standpoint, we -- all of us see the macro indicators around the world, in the United States, in Europe, and emerging markets remain mixed. But again, we were pleased with how the business performed in the face of those macro indicators, and so we're hopeful that, that will continue going forward.

On Q2, stability in operating profits and margins in PP in recent quarters are good. We want to keep that trend going. Price pressure, again, we think is easing again. Remember we have -- this is a long cycle backlog, and so it doesn't mean that this will quickly materialize. And that's, again, why this cost out piece in both the Power businesses are so important that we addressed that. We are pleased about the resilience of orders in Europe. That is -- it's a two-tiered world between the South and North, but we were pleased with being aided the strength that we did see in the North to be able to calm the down cycle in the South. From a Chinese standpoint, I'd say the biggest variable that we saw was the Low Voltage Products turnaround. We do tie that to a better demand pattern in the construction industry. And we also would take, you might ask about our July orders in Low Voltage Products, so far it's continued on its trend.

And that gives us a certain amount of confidence that, that could possibly continue through the quarter. And the sustained order growth across the portfolio in the United States, that's been going on for a while, and we would expect that to continue. We don't have any data that says that it should stop.

And down below, management focus for the rest of 2012, it shouldn't be a mystery. We have a lot of focus on cost. We have a lot of focus on finding growth areas around the world and driving that. Acquisition integration and focus in making sure, in both Baldor and also in Thomas & Betts and the other acquisitions that we've done, that we continue to bring those together and to bring the most value out of those that we possibly can.

And so with that, we're cautiously optimistic about the second half of the year. And that will end the presentation, and we'll turn it over for any questions that Michel and I can handle.

Question-and-Answer Session

Operator

[Operator Instructions] First question is from Mr. Mark Troman, Bank of America Merrill Lynch.

Mark Troman - BofA Merrill Lynch, Research Division

Just first question, I guess, there's always one on pricing. Interesting comments you're making about it leveling out, et cetera. Of the $235 million you put in your bridge of pricing, how much is in Power Products? Or roughly how much -- or how is it roughly distributed, I guess? And in Power Products specifically, what are the order -- what is the percentage change in orders looking like relative to what's going on in sales? And I guess, finally, just to go full circle on that, what is the typical lead-time we're looking at now for the newly priced orders to go through the sales line in that division? That's the question on pricing. And then secondly, on China, sort of intriguing comments, you've seen a pickup in Q2 versus Q1, particularly in low voltage. I don't know if you guys can just go through that in a bit more detail, because based -- I know it may be specifically for construction, but we're generally not seeing that in other companies. Was there a de-stocking in Q1 and is this a correction, or how would you read it? A bit of color on that would be very helpful.

Michel Demaré

Okay. So the pricing impacts, obviously, as in the other quarters, our PP has been the one that has the biggest proportion of this pricing impact. I would say about 2/3 of that total is from Power Products. And actually if you take the total, I would say that more than 90% comes from the Power divisions. The Automation divisions are a bit better in Power. And that product is a bit less good in systems, so they kind of offset each other. So most of this pricing is really in the Power divisions, overall. In terms of the weight of pricing in orders versus revenues. As we see -- as we said we've seen certain improvement in the pricing on orders this quarter across all the business units, but obviously, a major difference compared to last quarter is for sure the Medium Voltage that have suffered as well from a mix issue in China in the first quarter that was corrected. And so, obviously, that has helped. At this stage, I would say that the pricing pace in orders trailed the revenues by 1% to slightly more. So that's sort of the kind of improvement that we have tried to reflect to you.

Joseph M. Hogan

Mark, we also talked about how long does it take for things to bleed through from an order to a backlog to -- into, and Power Product is all over the board. I mean, the Medium Voltage Products has a very short cycle, a medium cycle business to it. Large power transformers are really large, and so it takes a long time, 18 months or 12 months, same way with the accentuated switchgear. And so I think you have to look at the portfolio itself. When we talk about price, obviously, large power transformers have been the most challenged part of the portfolio. I'd say in general, it takes 12 to 18 months for that to come through. And Mark, you said something, and I want to make it very clear. You said that price was flattening out. We didn't say that. We said that margin was flattening out, and we're driving this margin piece by the cost down that we've been having in this business. But we continue to see price down in the Power Products marketplace. It's just not as severe and not in line with the revenue like Michel...

Michel Demaré

Right. The pace of price decline is slowing down.

Joseph M. Hogan

And Mark, in your last question on China, Low Voltage Product. I'll tell you, our clarity on this isn't complete. But here's what we see. Was there some de-stocking and restocking between the first and the second quarter? I'd have to say, yes, absolutely. There's no way you would see that kind of a turnaround with some aspect of stocking and restocking. But at the same time, that's almost a discreet event. So but between June and July, we have seen a pickup in construction orders, and those construction orders have continued in July. And so I'm not making a forecast for the Chinese construction market, I'm only reporting on what we're seeing on the ground there. It's been favorable to this business. It's helped that turnaround between those 2 quarters. And Michel and I just wanted to report that as accurately as what we're seeing in the marketplace right now.

Mark Troman - BofA Merrill Lynch, Research Division

That's very helpful, Joe. Michel, just very quickly. On orders, did you say the orders were 1% better pretty much than what you see in sales? Is that correct?

Michel Demaré

Yes, that's right. Roughly, about 1%. A bit different in each units, but roughly about 1% in detail.

Operator

Next question is from Mr. Andreas Willi, JPMorgan.

Andreas P. Willi - JP Morgan Chase & Co, Research Division

2 questions, please. The first one, to follow up on the outlook. We have seen some improvement in maybe some of the early cycle businesses, but we've seen all the growth slowing in some of the mid-cycle Automation businesses. So if you balance that, where do you think overall base order trends could move now? That's kind of moved down to around 1% growth. Is that the level we should expect, or should we read your outlook as that base orders have troughed in Q2 if you look across your board -- across the board? The second question on cash flow, obviously, I understand the currency impact on the quarter and the seasonality that Q4 will be stronger. But if we look at cash conversion for the last 6 quarters, which is just above 50%, but still lower than what we have seen in ABB in the past, even taking into account a higher CapEx. Are you happy on how inventories, payables, receivables and so, are developing? Or is there a more fundamental problem at cash conversion at ABB?

Joseph M. Hogan

I'll take the first one on the base orders piece and give Michel the cash flow. I'm not going to project what I think our base order rate is going to be going into the third quarter. But if I use just a rational expectations model, I mean, the 0% to 2% base order growth that we've seen, if you look at our base order growth by region, we had about 4 of them up and 4 of them down in that sense, and correlating pretty strongly with what I read on the orders chart, overall. I think, if you get behind just raw base order numbers, Andreas, you take a look at China in itself is -- there are certain segments of the marketplace, like in LP and construction we talked about, are much better. But if you look at Discrete Automation and Motion, particularly in the renewables industry in China and our sales to that have been down in that marketplace quarter-to-quarter. So that hasn't revived itself. Transportation orders across both of those businesses, that we reported were down in the first quarter, continue to be down, and the nuclear industry hasn't coming back yet either. Our Medium Voltage business in Power Products in China, which we reported is affected by the nuclear piece and also by the transportation piece, what our sales teams would have effectively done is to really re-catalyze that business around some industrial channels and to push our products through those. And they have been very successful in doing that over the last 90 days, and it really helped to overcome that piece. So I think that's the kind of color. If you move to our other businesses, too, on the base side. Again, as I mentioned before, on the marine side, which we see in base orders and large orders have been good. And that's been -- it's really been marine associated with oil and gas. When you look at the PAPs, it's been a big part of that. And the mining and minerals piece continues to be strong, also. And automotive really reflected to our Robotics business. This changes continue to be pretty strong geographically, too.

Michel Demaré

And I will add also that the 2 Power businesses had a base order increase of about 5% each, 5% to 6%, as well as service. And service, actually, we were not happy with the way it will increase this quarter at 5%. So if you look at all that, we think indeed that there's a good base here to work from, and that dictates also the reason why we are a little bit more optimistic now. With regards to the cash, no, I'm not happy with the cash for sure. We are trying since a few years to try to have a much better cash flow spread all over the year instead of having always this concentration in Q4. But the other thing, a part of it is also due to the nature of the industry, especially with utility customers. We are working -- we have really launched, a few quarters ago, a long-term program, which is really working together with operational excellence people to try to work on the root causes also of design, networking capital and quality, on documentation, et cetera. And obviously, that takes a little bit more time to be produced. Meanwhile, we are more or less at 16% nowadays of networking capital. Our target is still to be in the range of 11% to 14%. I would say realistically, if we reached 13% at the end of the year, I would already be very happy. Now, 3% on $40 billion, that is $1.2 billion improvement that you can just get there. Whether we're going to reach 90% this year, I think that's going to be sharp, especially due to the currency effects. But again, if you look at it over 5 years, the last 5 years, we achieved the conversion of 100% and that was a combinations of years where we had 70% and years where we had a 130%. So I think we have to look at it a little bit more from that perspective, but I'm still quite confident that we're going to have a very strong second half and especially a very strong fourth quarter that should get as much closer to the standards that you have been used to.

Operator

Next question is from Mr. Ben Uglow from Morgan Stanley.

Ben Uglow - Morgan Stanley, Research Division

I have a few questions. One was just within the Power Products area, are there any product categories where you are actually definitively seeing sort of increases? Where rather than it just getting less fast, you're actually seeing a change in customer behavior where they are more willing to place orders at a higher price. So that was question number 1. Question number 2, and I'm sure Michel won't forgive me for asking this about the margin bridge. But when I look at the margin bridge and I sort of try to index all the rough numbers that have been coming out, when I look into the second half of this year, am I right to think that the pricing impact, if things stay where they are, should get a lot, lot less onerous for you? Because it was the fourth quarter of last year where you had a very, very tough pricing experience. That's an unfair question number 2. And then finally, in North America, very strong performance, still in Automation, and obviously, confident statements about the order situation. Listening to Rockwell yesterday, they appear to see some sort of change in trend during the quarter and lowered some of their revenue expectations. Did you see any change in pattern of your orders or your sort of industrial demand on the Automation side in North America during the quarter?

Joseph M. Hogan

Ben, I will take your first 1. Michel will take the margin bridge, and then I'll come back to North American automation, okay? On PP, I don't want to walk through the 13 product group categories within PP and what we see and what we don't. But I'd say, if we take from the high points is substations in the Middle East and large power transformers, right? Since the duties have been assigned on Korean large power transformers in the United States, we have seen a price -- the market actually increase in that sense. And even though it had really nothing to do from a governmental standpoint in the Middle East, at the same time, we saw prices rise for Korean transformers in the Middle East also, and that's helped. But there's something that we have to explain there since, Ben, a lot of those we weren't even quoting on because the prices were too low. And so as the prices have come back, they begin to come back in the range, that we would consider to be something that we want to quote on. They're still not tripping margin in that sense, but there's something that puts back in the range with the right kind of cost control and focus in productivity in our sense, then we can be more competitive in there. And I would keep that conversation really around large power transformers right now. There's been no real change from a Medium Voltage standpoint, our Medium Voltage business. And for high voltage gas, since we have switchgear, it's still competitive, but it's hard, it's not as uniform as the market. We've introduced some new products in gasses and switchgear. They're significantly lower in cost and a better form factor that we'll be selling into the marketplace, and we'll be driving that really the later part of this year, as we get into 2013, it should help.

Michel Demaré

And I think it's fair to say as well, that we keep expecting these price declines to come, because that is just how the other competition has put. And so maybe there's a bit too much focus on the price, too, because what is important is to counter this price pressure by coming with products that are designed for cheaper cost overall so that at the end, even if the price goes down, we can maintain the margin. And that's a little bit of the ingredients that we are trying to use there. So and that gets me into your second question on the margin, which I hear what you said. It is quite possible, although, because of just what I said, some products are just not sold anymore at the same prices than they were sold 2 or 3 years ago. But they also are now designed and manufactured at a cheaper cost. So you're going to have a price pressure, but still an acceptable margin. It is a certain likelihood, it is possible what you said, because the price pressure was extremely strong in Q2 -- in H2 last year. I would say, though, that we're not going to speculate on that, and that's why we keep going at full speed on the cost savings, and that we have really this intention that we confirmed today to even exceed the $1 billion of savings that we had announced at the beginning of the year.

Joseph M. Hogan

And Ben, lastly, on North American automation. I can tell you that if you take our Low Voltage Business which I would have lined with somewhat with automation business, and this before T&B, we actually saw an upturn in orders in that business in the quarter. It could have some indirect relationship with T&B in the sense of distribution channels or whatever, but I wouldn't necessarily think that that's the case yet. When you look at our drives business, which is sold through Discrete Automation and Motion, we've actually seen an increase, a continuing increase in our drives in sales in that marketplace. And so that's a really good sign for us. If you take Baldor itself, and just their motors business in the United States, it's still positive growth. It's just slower growth quarter-to-quarter than what we saw last year, but look, there's some really tough comparisons. Because Baldor is running at high double-digit rates last year compared to this year. So look, I read -- Ben, I didn't listen to the Rockwell announcement, I wouldn't do that. But I actually read the transcripts from the Rockwell discussion. It looked to me like they were talking more about some currency translations issues in Brazil and also some issues in China. And I didn't see that much attention to the U.S. marketplace as you mentioned. So I was really surprised with your question.

Operator

Next question, from Mr. William Mackie, Berenberg Bank.

William Mackie - Berenberg Bank, Research Division

A couple questions. First, on Power Systems, could you just drill down on a little more behind the weakness in the operating result, and at least how you sort of aim to rectify the underperformance on a number of contracts across the world that you seem to have had recurring in a couple of quarters now? And then secondly, coming back to Low Voltage and, perhaps, tying that up with order intakes across Europe. We've had the mix effect coming up a number of occasions there and in Discrete Automation with regards to Italy. So perhaps, could you just highlight how you've seen demand trending within Italy and some of the other parts of Germany affecting those businesses?

Michel Demaré

Okay. Yes, on the PS side, I would say that this continuous project slippage that you see is also been the result of the work we are doing to try to address these issues. A lot of these projects are partly old projects. It's also important to specify that there is actually very little in the business unit with systems, which makes this a larger offshore wind connection that we always mentioned there. The charges were less than $10 million, but we have had a few out of all the projects we take care of in the area of power generation automation, not to mention in India we have a substation. What we have done, really, is that the new management team here in PS has really now created a new job that really looks exclusively at all these other excellence issue around project management and trying to address that. We are also even using our own internal audit to review the work in progress, which sometimes also forces us to take some corrections to really make sure that we put all the problems on the table and can address that from the right perspective. So obviously, it's disappointing. We are disappointed, too. We are not giving up on the targets of PS to get back within their range, in fact, if you look last year, the last 2 quarters, PS had an EBITDA margin that was very close to 10%. We don't see any reason that they couldn't repeat this performance this year, but at the same time, as we say also every quarter, we remind that this is a project business. There's a lot of projects with high risks. And that, unfortunately, from time to time, there are some risks that come true. But I can reassure you that we are really very forcefully addressing it, and I hope that we can stabilize these project issues in the short term.

Joseph M. Hogan

And, William, when you talk about LP, I just, looking at some data, overall -- and Michel, yes?

Michel Demaré

In fact, overall, LP was still quite down in Italy for the quarter. It was, I think, something like 20%. But it was also because of some large order comparison, the base orders actually were down 7% compared to the same quarter last year. So still weak, but at least not in the kind of dramatic proportions that we have seen in the first quarter.

Joseph M. Hogan

William, I think what's worth mentioning in that business, too, is our systems business that we talked about, negative mix in that business in the first quarter and fourth quarter last year. Actually the orders were down about 4% on the quarter, too. And so that kind of in line with what we normally see in this business. It's more of a kind of a mid-cycle business, it's not a real short cycle business. And so that was -- it wasn't really necessarily a phenomenon in the quarter, unlike we saw on the first quarter or 2.

Michel Demaré

But I think one very positive development we have seen this quarter compared to the previous quarter is that all the product division, all the product units have shown positive order increase, while last quarter, in fact, the product units were down and the systems unit which carries much less margin was up. It's not here the case in revenue. So despite the better margin that you see this quarter in Low Voltage Products, it's actually still the result of a pretty weak product mix where revenues in the product division is down and revenues in the system divisions is up. But since there, the cycle is pretty short. Next time, we should get more of a positive mix now as these orders will translate into revenues.

William Mackie - Berenberg Bank, Research Division

That's great. Can I just follow-up quickly on a separate topic, which is relating to wind and renewables. Specifically, there's been a strong surge in volumes in the renewables wind market perhaps in the first part of this year, but a lot of concerns over the U.S. specifically next year. I think Briis [ph] has aggregated a business with $1 billion plus of revenue there. How is it trended so far this year, and where do you see the potential risk as we run into 2013?

Joseph M. Hogan

When you talk about Briis [ph] aggregating $1 billion business in wind, what are you referring to?

Michel Demaré

Because it's not in the U.S. You are talking of...

Joseph M. Hogan

You're talking about the offshore wind market in Europe?

William Mackie - Berenberg Bank, Research Division

The business that you operate with in renewables in wind in conjunction with inverters, medium voltage equipment, drive equipment. So all of the...

Joseph M. Hogan

Yes, that's very different. Is your question, William, about what we're seeing by geography based on wind?

William Mackie - Berenberg Bank, Research Division

Yes.

Joseph M. Hogan

Look, I think the U.S. market is at a standstill right now until the whole PPA piece is worked out. And that's -- I think that's still to be decided. We don't have a large wind exposure in the United States. At least not a material exposure. We do participate from an inverter standpoint, from a transformer standpoint or whatever, but I wouldn't say it's material in any sense. Our biggest participation from a wind standpoint right now are the offshore wind jobs that we have that are booked and being executed through Power Systems. I think you saw in the news today that Tenet was going to delay one of those -- the bidding and execution on one of those large offshore wind. That has just to do with the execution cycle, I think, being so large and in some questions around the execution of those forms. But we expect those investments to go forward. We expect to participate in those, I think they just might be staged differently depending on how the execution around the offshore goes. I hope that's what you're looking for.

Operator

Next question, Mr. James Moore, Redburn Partners.

James Moore - Redburn Partners LLP, Research Division

Some questions across the businesses, actually. In the Power Products business, I know there's been some questions on order pricing, am I getting the sense that maybe that's down 3% or 4% year-on-year. I'm just trying to get a feel for the sequential picture, and wondered if you could help us a little bit there on the regional side of the sequential picture, tying into the answer you gave earlier. On the Low Voltage business, you've kindly gave us an order number for Italy. I wondered if you could do the same for China against the down 20% that you saw in the first quarter, just to see how that's moved? And then in the Process Automation business, you've talked about what seems to me to be a better performance in the product side of the business which makes a decent margin. And we heard last time around about some difficulties in the turbocharging side of that business over a couple of quarters. Has this turbocharging got better, or is it just that measurements and other pieces have offset continued turbocharging weakness?

Joseph M. Hogan

Well, Michel works on the sequential picture by region.

Michel Demaré

Okay. I'm working on the pricing trend by country.

Joseph M. Hogan

Okay. Just let me go to the Process Automation piece. Turbo orders actually weren't any better in the quarter than they were before, they were relatively flat to down. Obviously, the service part of that business is a good part of that business force, and that continues, and it's very robust in that sense. But those margins, actually, you can really take turbo out of it, the margins itself have to do with a really good project execution around the teams, too, so no surprise in that sense. And then some of the areas like measurement products has had some good sequential increases in margin from quarter-to-quarter. Our 800 XA business, too, we continue to improve. Our 800 XA, in the sense of the software margins in that business, too.

Michel Demaré

And the shift in service, that's obviously...

Joseph M. Hogan

Yes, [indiscernible]

Michel Demaré

Yes. Process Automation is also in the process of cleaning up or upgrading its service portfolio or getting out of some of these full service contracts that we have made. And so you still see our quality service goals, but it is in fact much more life cycle service that we are taking out now, and that obviously is a much better margin for us, plus it has also more pull-through effect for the rest of the business, so that helps quite a while as well.

James Moore - Redburn Partners LLP, Research Division

The improvements in Process Automation are more sustainable ones rather than just a sustainable quarter?

Michel Demaré

Yes, because what you see is -- it's really on what you'll improve, and that you see almost quarter-by-quarter now on this. So it's really a combination of cost takeout, of portfolio enrichment with more product, better quality services, a little bit less systems and more connectivity on the systems projects as they come.

Joseph M. Hogan

And that's a very conscious effort, James. From our standpoint, building that team standpoint, over the last, really, 18 months. On the LP China orders?

Michel Demaré

So LP China orders were actually up 23% for the quarter. So there was, really, a very strong rebound from that.

Joseph M. Hogan

Yes, I have the same thing.

Michel Demaré

I saw Joe being skeptical so I went about checking the number. But it is right. We were not used to this number anymore. So up 23%. And then your question regarding sequential pricing on orders in PP. So indeed, it's an improvement compared to last quarter of a little bit more than 1% on average. Obviously, each business unit has a little bit different 1, but the best improvement is in Medium Voltage, for the reasons I mentioned already before. So that is, indeed, encouraging. We see really some price improvement in areas like U.S. or China. But I won't go in more details on that, I think it gives you an overall trend of what you need to know here.

James Moore - Redburn Partners LLP, Research Division

That's very helpful. Could I just follow-up with one other? On currency, you kindly gave us the $100 million translation number, And I suppose the hedging, minus $82 million, is the hedging side of it, and you didn't talk much about transaction. Given your cost and revenues slight mismatch, do you also have a significant transaction negative going on in the quarter?

Michel Demaré

No, in fact, the transactions, we are hedging them because they are shorter in nature. So in the balance sheet, and we are hedging the balance sheet, so that is part of this cash effect that you see in the corporate hedges for instance. So really, it's also something I will develop a little bit more on the Capital Markets Day in September, but you could really say we have a structure of foreign exchange exposure on one side, which is just where we sell compared to where we manufacture. We had a cash flow exposures which we always hedge, for instance, when we take a project. As soon as the project is awarded, we hedge all the cash flows. And then we have this translation exposure, which is just simply the translation of reporting all the revenues and profits that we have made in non-dollar countries and reporting that into a U.S. dollar income statement. So these are the 3, the transactions, they are in the balance sheet, we fully hedge everything, and so there is no impact on that one.

Operator

Next question, from Mr. Fredric Stahl from UBS.

Fredric Stahl - UBS Investment Bank, Research Division

I just want to know, if we look at your order intake across Northern Europe and considering that Germany is down a bit here, is it still fair to -- is it fair to assume that the boost you had in Norway and U.K. is a bit more lumpy, even if base orders were up, as well, just by the nature of those end markets, and that we maybe should be a bit more balanced when we look at our models here in the coming quarters?

Michel Demaré

Well, obviously, there are sometimes some large orders. But let me check here, 2 minutes, see if I can find some information on that. From what I recall, as I'm looking for -- Norway has had a very good performance already since quite a while, because it is a very important country, both on the marine side and on the...

Joseph M. Hogan

Oil and gas side.

Michel Demaré

Oil and gas side. And that obviously helps. Actually all the Nordic countries in the first quarter had performed very well. This time, in Sweden, it's a little bit down, but still quite constant. So what you see, in fact, is the Southern countries are really down, but we have seen a number of these countries, like Norway, like U.K., but also some Eastern European countries, also Russia, that they have really more than offset that. So, yes, it can be a bit more lumpy, because oil and gas is, obviously, larger orders, but it has been really quite stable over quite a while now.

Fredric Stahl - UBS Investment Bank, Research Division

Okay, great. And then if you could give some -- could you maybe give some examples on what's driving your U.S. growth at the moment? What kind of industries are still propelling, doing well for you?

Joseph M. Hogan

Well, our Power business continue to expand there. And so I think both on the transmission and somewhat on the distribution side, that continues to go well. I think these are not large jobs necessarily, I think they're just upgrades to different areas around the country that we've cut off a big order with AP and just enhancing the grid over the quarter also from an automation standpoint in the United States. We -- this has continued, the mining part in the U.S. has been fairly strong. And I think we've had a residual effect on the frac-ing that's been going on in the United States, too. And that's, say, not just frac-ing for gas, if you look at a lot of the drill rigs there were in gas, and as the gas price has gone down, you probably know a lot of those rigs have been moved over to really frac for oil. And there's a huge amount of motors and drives and different things that are associated with that industry, so we indirectly benefit from that also. and I'd say that's been one of the...

Michel Demaré

[indiscernible]

Joseph M. Hogan

Yes, that's true, automotive. Michel has mentioned that automotive robotics has continued to do well for us also. And as I mentioned in the introduction, we had a large order from Ford for Robotics that really helped Discrete Automation and Motion in the second quarter.

Operator

Next question from Mr. Olivier Esnou, Exane BNP Paribas.

Olivier Esnou - Exane BNP Paribas, Research Division

First on the foreign exchange impact, I mean, a good granularity from you. I'm just wondering with the info you have now, is it possible to say if currency stay where they are now, what would be the impact in H2?

Michel Demaré

You always compare to the same quarter last year. So we would have to make -- you would have to make an analysis to see a little bit what was the average of dollar rate in the third quarter last year to understand a bit what it is on there. So let's say, if the currency doesn't move, it will obviously have less impact on the hedges, and so the cash part of the hedges and the derivative part. But the translation, that one will have to go back, which I haven't done to the average rates of last year.

Olivier Esnou - Exane BNP Paribas, Research Division

Okay. And maybe...

Michel Demaré

But you see, more or less, the direction. I mean, obviously, the impact, when the dollar goes up, it's negative for us. So based on that, you can try to -- there's such a discrepancy of variation versus different currencies, that the 2 together is really difficult to do. Then again, Olivier, I really will try to spend some time about that in the Capital Markets Day, to really explain a bit in more detail these exposures. And I hope that can help, as well, to better understand what is behind the numbers.

Olivier Esnou - Exane BNP Paribas, Research Division

Okay. And maybe a follow-up on the reinvestment piece in the bridge. If I look at it, it kind of continues to accelerate, and at the same time, all those are up but they decelerate. So I was wondering how you think about it, and what's the outlook for that part really?

Michel Demaré

I don't think it really accelerated because in the first quarter, if I recall, the reinvestment was $145 million, so it's $10 million less. Obviously, it's a lot of people, so you cannot change the pace from 1 months to another. We have also, obviously, worked on a number of technology project, like we have talked about is this 1100 KB, HVDC transformer that we just finished the part of the test. It's really a pretty sizable investment that you can't change very fast. So we are, obviously, trying to slow down some programs to adjust to a slightly slower growth, but as I pointed out when I explained the bridge, I think that as long as these sales in R&D investments are taken care of by the EBITDA coming from marginal volume, we consider it, in a way, they are kind of self-financing themselves.

Joseph M. Hogan

And some, I think, it's buried in the other on the bridge side, our G&A costs were actually down. When we take those G&A costs and we recycle them back into that part of the business, it helps us grow to a bit.

Olivier Esnou - Exane BNP Paribas, Research Division

Yes. I was looking at it on a 12-month trailing, absolute. But I understand you're trying to slow it. How do you measure the actual volume contribution of that specific investment? Are you able to separate out the volume bridge? What's the investment?

Michel Demaré

We don't go into details on the volume bridge. But when, let's say, when Joe and I have a business review, for instance, to evaluate the return on selling expense, we have to really see in which country people invested in salespeople and starts seeing the kind of growth rate you have in these countries compared to others where the effort is not being made. And I think that one is quite easy to measure. The return on the reserves is always a bit more complex, and adds also a bit of a longer payback, but that is the price to pay to remain competitive here. And part of it is also investing in research to get to cheaper design and offset the price pressure.

Olivier Esnou - Exane BNP Paribas, Research Division

So if we -- so as a kind of bottom line, how much of that piece do you think has to happen anyway? And how much is flexible depending on the very uncertain outlook we have?

Michel Demaré

To be honest, I have never asked myself this question. So I can't really answer.

Joseph M. Hogan

And if Michel never asked himself, then I never asked either.

Operator

The last question for today is from Mrs. Daniela Costa, Goldman Sachs.

Daniela Costa - Goldman Sachs Group Inc., Research Division

3 points. The first one on market shares, really, you seem to have some underlying evolutions, which are better than some of the competitors that reported recently in terms of orders. Can you comment if you think some of these is related to market share changes by segment? And the second one, slightly related to that but more focused in U.S. Power Products, have you started seeing some impacts from the anti-dumping rule against the Korean companies, what's the status there? And then finally, I think Michel mentioned in the presentation, what was the CROI level at the moment, but I couldn't understand. And so if you wouldn't mind repeating what's the present number.

Joseph M. Hogan

I think on market share versus competition, I wouldn't say that we have taken any kind of excess market share versus competition in any meaningful way. You might be referring to one of our competitor's announcements and you saw what their T&D order growth rates were. And if you look at the margin in that business at the same time, it was kind of down. I can't explain that, Okay? I can only explain that from a Power Products standpoint, the team has been executing well. We have a broad portfolio. But I don't see us out there, and I could tell you, in any direct way, trying to gain share through price in any way. The performance of our teams have been very good. And I think you seen that in the sense of the 14.7% margin capability within Power Products, is to be able to find business out there that we feel is reasonable from a margin standpoint and then drive costs as hard as we can to make sure that we maintain that capability. From the U.S. Power Products standpoint, anti-dumping. Remember, the anti-dumping has to do with large power transformers over a certain size. We have, obviously, seen our competition respond in that sense, but we're much more in the U.S. in large power transformers, than we do here. Air Insulated Switchgear, there's a big distribution transformer side that has not been addressed at all by the anti-dumping piece, and we don't have a case in that sense. And but we continue to drive productivity in that business, and we contend to be very competitive.

Michel Demaré

I will speak out to the cash return on invested capital. I'd say that we are at low teens or close to 10%. And again, if you look in the last 18 months, we had spent about $11 billion of acquisitions. These acquisitions for the moment have a low single digit return. If you go back before this time when we start getting more liquidity so that we see our ROIC was above 20%, and so the timing is an important role here. And I will develop that more at the Capital Markets Day in September.

Joseph M. Hogan

And so with that, we'd like to thank you for joining us. And again, Michel and I were pleased with the progress that we saw in the second quarter versus the first quarter. We know we still live in a time, from a macroeconomic standpoint, there's a lot of questions out there. But we were pleased with the orders that we saw around the globe, the rebound in China, the continuing strength in the Northern Europe and the United States. And we're going to push like crazy to continue that trend going into the third quarter, and we'll come back and report to you on it.

And in the end, I'll again reference the Capital Markets Day that Michel talked about. That's going to be December 12. And it's going to be held in London, and invitations are going to come out shortly with the agenda. So we hope as many of you as possible to join us. And we look forward to seeing you then.

So with that, thanks again. And I know many are going on a holiday, I hope you have a good holiday. And we'll check in again with you in the third quarter. Thanks again.

Michel Demaré

Thank you. Bye-bye.

Operator

Ladies and gentlemen, the conference is now over. Thank you for choosing the Chorus Call facility, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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